Adult ADD and Money

Overlooking the Obvious

Everyday on my way to and from work I pass by a new Market and Deli that I think about going into. They have done an excellent job at advertising, with billboards and an electronic sign that gets your attention. When I look at the lunch and takeout menu they have diverse items that I think that I would enjoy, there is just one big glaring problem. The deli is on a really narrow dirt road where you can not even see the building from the main road. I am sure that many other people like me, have thought about trying the new deli and end up changing their mind when faced with this one annoying obstacle.

Sometimes when making money management decisions ADD adults get so caught up in dealing with  small, more stimulating decisions that they overlook the most obvious reasons why they are struggling financially. I am not saying that projects like improving your credit score, reducing your grocery bill, reducing your total energy use, or perfecting your investment portfolio are not worthwhile endeavors. But the fact is that if you want true financial change in your life you have to deal with the tough main issues that are holding you back. For some people it is finding meaningful work that they enjoy, for others it is dealing with the emotional issues that cause overspending, or it can be developing and executing the systems to help pay and manage bills.

I believe that if the Market & Deli wants to have long term success, it is going to have to do something about improving how people can access it. This is not a simple or easy decision, it could mean moving the deli to a place where it can been seen, or it may mean widening and improving the road so that it is more inviting. The more challenging and difficult a task is the more likely you will receive a greater benefit from dealing with it. Often people want easy ways to deal with their problems and most of the time they get frustrated when the truth is that most challenges you deal with in life are not easy. 

My love/hate (mostly hate) relationship with Money

Diane Ladd challenged her readers to write about their love affair with money. (For more information see previous post) I have got to admit that this is a difficult assignment for me. I think this is because even though I work in the Financial industry and my blog is titled Adult ADD and Money, I really have come to loathe money is general. I don't really loathe the concept of money, I loathe the damage that having money or lacking money can cause to a person.

Growing up I viewed money as the great divider. The social groups that you were in mostly depended on your perceived social status. Money bought you the clothes so that you would fit in in school, it determined your social calendar, and bought you the toys you could brag about. Sometimes the scorn of kids who had more money than me was so thick you could cut it with a knife. You could feel their attitude of superiority, and it hurt.

I deserve a lot of the blame for my relationship with money. When I have had a little extra I would always find someway to spend it all that gave me a temporary high. I tried to ignore money when I was lacking it, but that never solved my problems, money is a cruel lover and was always seeking revenge when I was neglectful. I don't always appreciate what money has done for me and I feel I am not always putting enough into the relationship to keep it stable in the future.

However my relationship with money is continuing to improve. Once I discovered that money was not responsible for my happiness, that I was the only person or thing who was in charge of my happiness. I have been less judgmental of the relationship that I and others have with money, I have been more accepting of money's faults, and I continue to notice more of money's strengths. There just might be hope for us yet.

Interesting ADD Friendly Blog Posts - 4/9

Here are three blog posts that I have read this week that are ADD friendly and deal with money issues that are common for adults with ADD.

A quick and easy way to control spending (Brip Blap)

60% of NBA Players Go Broke Within 5 Years of Retirement? (All Financial Matters)

Tax Cat: Help! I Owe The IRS Money And I Don't Have Any! (The Consumerist)

Six Overlooked Reasons why you are struggling with your finances: Reason #3 - Not identifying emotional obstacles

It can be quite challenging for an adult with ADD to deal with the day to day management of money. It often becomes impossible when you are dealing with unidentified emotional obstacles. There are two major areas where emotional obstacles can do severe damage to someone's personal finance. The first and most obvious area to look at is emotional spending. Examples of emotional spending can include shopping at retail stores, drinking and eating out, gambling, beauty treatments, and entertainment. Most people associate emotional spending with lavish purchases, but for many people it involves lots of small purchases to make them feel good.

From time to time everyone spends money to make themselves feel better. There is nothing wrong with indulging yourself every once in a while, but if you find yourself always spending more money than you planned, it could help to identify the reason behind your spending. MP Dunleavey at MSN Money states  several reasons why people emotionally spend money:

Cope with stress.

Cure the blues.

Diffuse feelings of anger or frustration.

Ease boredom.

Feel special.

Soothe ourselves after a bad day (or reward ourselves for a good one.)

Once you have identified the reason, it will be easier to stop yourself from emotional spending. However, in most cases you are going to need to deal with the root cause of why you want to spend money to make yourself feel better. Even if you are able to stop yourself from emotional spending, other bad habits like drinking, smoking, or overeating could replace your emotional spending.

Six Overlooked Reasons why you are struggling with your finances: Reason #2 - Have not made other key life decisions

Financial Planning without other life planning is like being on a rudder-less ship. If your financial boat is sinking it is important to make short term financial decisions to keep your ship afloat. Keeping you financial ship afloat basically means being able to pay all of your bills today. Keeping your financial ship afloat is something that everyone should strive for, however if this is all that you are able to do, then you are struggling with your finances.

Without having long term goals you will lose the motivation to save money, and to pay down your debt. You will also be more likely to make impulsive spending decisions. Long term planning does not have to complex or complete, it is something that you can change at any time. Basically you need to start be answering a few questions:

What do you want to do with your career? Perhaps you are completely satisfied with your career or maybe you have the desire to move up in your current field, you might want to switch fields or even open up your own business. This will give you the incentive to cut costs if you want to switch fields or save up enough money to go to school or to open your business.

What do you want to give to your family? Perhaps your goal is to spend more time with your family, to able to help out your children with their college education, or to be able to buy a home for your family to grow up.

What do you want to give back to your community? You want to think about this in both time and money.

What other goals will make you happy? Do you want to visit Europe, become a black belt in karate, have your own art show, or restore an antique automobile. It is likely that you will need some money to help you achieve these goals. This will also help you to think about whether to spend extra money on other things that might not make you as happy.

This is obviously not a complete list of long term goals, but these are the major areas that will affect your financial planning, and will give your financial ship the rudder it needs to go in a positive direction.

Six Overlooked Reasons why you are struggling with your finances: Reason #1 - Not Fully Committed

Commitment to a goal is usually measured by the action that someone takes to achieve the goal.  Adults with ADD usually start out with a flurry of action when trying to achieve a goal and confuse this action with being totally committed to a goal. What often happens is that ADD adults tend to lose focus after the initial burst of activity towards their goal. A primary reason for this loss of focus is that a person never really thought about why they desired to achieve the goal. Commitment is measured by activity, but it is fueled by desire.

In order to be fully committed to your goal you need to convince yourself that this is something that YOU truly want to do. Often your goals are set by what other people want and desire, even if you want to please these people it is unlikely that you will maintain long term commitment to achieve this goal. The million dollar question is, what will motivate you to make and maintain positive financial changes in your life? For example some common motivating ideas include; the security of having your own home, the desire to not be indebted to anyone, and the ability to work less and spend more time with friends and family. It does not matter what you want to achieve as long as your desire is strong. When you combine desire with action you are truly committed to achieving your financial goals

There are two stages between Education and Action

In Jennifer Koretsky's book Odd One Out (The Maverick's Guide to Adult ADD) she lists the four stages in order to make true lasting change in your life. The four stages are:

1.  Education

2.  Awareness

3.  Reframing

4.  Action 

The problem that many ADD adults have when trying to make financial changes is that they take action without properly going through the other stages of change. Many people who want to make financial changes start by trying to educate themselves. There are two main pitfalls that happen during the education stage. People get overwhelmed with the vast amount of financial information and stop making progress toward their goals, and people map out an unrealistic action plan based only on the education that they did.

Being overwhelmed can derail any goal, the key is to make your goal specific enough so that you can limit the scope of your education. For example it is a lot easier to educate yourself about getting out off debt, than it is to educate yourself on improving your finances.

The other pitfall of going from education directly to action can be even more detrimental than taking no action at all. When developing a financial action plan it is important to understand your strengths and weaknesses in regards to your financial behavior (Awareness). For example if you did not have any issues with impulsive spending, but did have issues with actually paying your bills you would want your action plan to focus on changing you bill paying behavior.  Instead of focusing on not paying your bills you could focus on how to increase the likelihood of paying your bills on time (Reframing). This could involve getting someone else to support you, paying bills when you are at your mental peak, or automating some of the bill paying steps. By focusing on all of the stages of change you will be more likely to make progress with your financial goals.

Is a Medical Flexible Spending Plan right for you?

Many employers have recently added medical flexible spending plans as a benefit. A medical FSA allows an employee to deposit earnings directly into a FSA account without having to pay taxes on that money. The employee fills out a claim form or uses a special debit card in order to access the FSA account for qualified medical related expenses. If you have a lot of medical expenses each year, you can save quite a bit of money. For example if you have deposited and used your FSA account for $2,400 worth of qualified medical expenses you would save $800 assuming a tax rate of 33%.

Based on these type of savings it would seem logical to put some money aside to fund your FSA account each year. However there are a couple of drawbacks to FSA accounts that are not ADD friendly. In many cases you will need to fill out a claim form in order to be reimbursed for expenses. The others major drawback is that if you do not spend the money that you put into the account each year, your employer gets to keep the remaining money in the account. It is possible to lose money on a medical FSA account if you overestimate your medical expenses and forget to file claims.

If you have regular medical expenses, it is probably a good idea to put some money aside in an FSA account. However if you do not have regular medical expenses and you are likely to forget to file claims, funding an FSA account may not be a good decision for you.

   

How much of your money do you actualy control?

How much of your money do you actually control? This is an important question to ask yourself so that you will have the proper perspective when making spending and savings decisions. I have set up an example of a typical household to illustrate my point. What I have done is to take a typical American household budget and put in what I believe is the minimum amount they will need to spend in order to function.

• Household Income                  $ 50,000
• Taxes                                    $16,000      32%
• Housing (including Maint.)       $14,000      28%
• Clothing                                 $500          1%
• Transportation                        $2,500        5%
• Utilities                                  $1,000        2%   
• Food                                     $4,000        8% 
• Misc                                     $500           1% 
• INCOME CONTROLLED        $11,500       23%

In this example you control 23 cents for every dollar you earn. Keep in my that this example does not include cable, cell phones, and other items that someone else might think is a necessity. Finding a way to save 1,000 over a year might not seem like a big deal if you compare it to the $50,000 that was earned, however it becomes quite significant when you compare it to the $11,500 that you actually control. The great thing about money is that you can exactly measure your financial situation, but without the proper perspective any measurements you do can be counter productive. 

Overcoming Money Challenges

There are several reasons why it can be difficult for an ADD adult to manage money:

1.  There are infinite choices involved with spending and managing money. The decisions can become overwhelming and an person with ADD will be more likely to avoid making decisions altogether.

2. The concept of money is not easily visualized ( people with ADD respond better when they are able to visualize a concept)

3. Day to Day management of money can be boring and tedious ( people with ADD have a greater difficulty completing task that are boring and tedious)

Here are a couple of tips to deal with some of the difficulties with money management

Reduce!  - Limiting you choices and decisions can do wonders for your ability to manage money. Examples of this include:

• Shopping at smaller stores where there are less choices.
• Writing down a shopping list of the things you need to buy before you go shopping. This will limit your decisions at the store and will reduce impulsive buys.
• Reduce the number of credit cards you use. This will reduce the number of bills that you pay

Use visualization techniques to help you in you battle with money management (yes it is a battle)

• Use a calendar to help you track when bills need to be pay.
• If you are saving for a specific goal, use pictures to remind you what you are saving for. It can be a lot easier to save for a house if you can visualize what you hope to buy when you have finished saving.
• Use different colors for different types of expenses if you are preparing a budget or Net Worth statement.

Unfortunately there is not a lot that can be done about money management being boring. There are things you can do to make money management easier:

• Make an appointment with yourself to pay bills. This should be done at a time where you are close to your mental peak. Try to maintain a regular schedule where you are paying bills around the same time with a regular interval. It is easier to put off paying bills when you do not have an established routine.
• The environment where you pay bills is also very important. It should be an area where you have all of the supplies to pay bills with minimal distractions. The key is to try to avoid having reasons why you can not pay your bills or manage your money.